Having your employees sign a Non-Compet agreement has its advantages and disadvantages. Here are some pros and cons to help you decide whether it benefits your company to keep one in place, or places unnecessary restrictions on you and your employees.
But first, what exactly is a non-compete agreement?
A non-compete agreement is a legal contract that prohibits an employee from working for or becoming a competitor for a certain period of time.
Noncompete agreements are typically enforced when the relationship between an employer and employee ends and the current employer wants to prevent the employee from competing against them in their next position.
Pro’s of a Non-Compete Agreement
Your employees very well might be less susceptible to recruitment offers, as a new position would require them to move or change their role. On the flip side, your competition is less likely to try hiring away your employees if they know there are restrictions on their availability.
Higher employee retention naturally feeds your customer retention rate. When you have greater continuity of personnel, your company is able to provide better service, leading to greater satisfaction.
Employee Retention = Customer Retention = Healthier bottom line
A secure company is a valuable company. Non-Competes increase the value of your company because they ensure that your intellectual property is secured. Customers and candidates alike value companies that keep proprietary practices in-house and the practice sends a powerful message of security and integrity to potential investors and companies who might be looking to acquire you.
Cons of a Non-Compete Agreement
Makes Recruitment More Difficult
Non-Competes are perceived as a barrier to many candidates. Knowing that leaving your company means either moving, changing industries, or just being unemployed for an amount of time gives potential hires pause. In the current hiring environment, you have to give yourself every available advantage to attract top talent.
Make Your Competition Look Good
If your competition isn’t using a NonCompete agreement they may become much more attractive to top performers. When given a choice between your company, and one where they aren’t tied down, most high performers would choose to the freedom the position that offers more flexibility.
It’s a State to State Proposition
The enforcement of these contracts varies wildly across state lines. In 2016 the White House put out a report on Non-Competes showing that some states, such as California, have a history of not enforcing the clauses, while others, such as Florida, tend to side with employers in litigation. Massachusetts recently attempted to pass new legislation to restrict or eliminate Non-Compete Agreements. Depending on where you’re doing business, your ability to even enforce your agreements could be in jeopardy.
A Third Way Forward
If the risks of requiring a Non-Compete are too steep, there is another way. Non-Disclosure agreements provide a level of security to your information and proprietary products without being so restrictive. You get the level of security you need, and your employees get enough freedom to move to another position if and when they need to.
A Non- Compete Agreement may be the closest thing to a win-win you can get.